Enel Spa Unsp/Adr

Good evening to all the people connected. Welcome to the first half 26 result presentation. NLCO Flavio Cattaneo will open with the key highlights and our CFO Stefano De Angelis will present the economic and financial result of the period. We ask those connected to the webcast to send questions only via email at investor.relations.nl.com Before we start, let me remind you that media is listening both to the presentation and the Q&A session. Thank you. And now let me hand over to the CEO.

Thank you, Omar. Welcome, everybody. Over the past months, we have continued to deliver on the strategy presented at the Capital Market Day and our results confirm a steady execution. Indeed, in the first half, EBITDA and net income increased by 3% year-on-year, reaching respectively 11.8 and 3.9 billion, in line with our expectations. In fact, due to the contribution of our activities in Spain and Latin America, we have been able to offset the impact of the Italian energy decree, as Stefano will detail later on. The strategic turnaround has improved the quality and the visibility of our earnings, reducing our exposure to market volatility. Growth Continuous to come from stronger underlying business performance and at the same time we're moving forward with both brownfield and greenfield investment while maintaining strict financial discipline. The focus on execution drove a 5% increase in earnings per share so far at 40 euro cents. These results allow us to expect full-year EPS at the top end of our guidance range. Let me now turn to our execution and the progress of our asset turnaround. Our asset base comes from tier 1 countries and more than 90% from regulated secured business with a low risk profile. Let me now show our progress in capital allocation across both Greenfield and Brownfield investment. Greenfield investment increased by 14%, especially in Tier 1 countries. Networks remain our main focus and the strong expansion of RAB up by 4.4 billion euros year on year. Further improves visibility on future growth. In renewables, capital allocation remains disciplined, We continue to select in projects with secure earnings supported by PPAs or a solid customer base. New capacity is progressing in line with the expectations with 3 Giga currently in execution. Regarding brownfield opportunities, since the beginning of the year we have signed agreements to expand our asset base. This transaction will add 1.5 Giga of renewable capacity and 350,000 customers. In addition we are evaluating 15 giga of further opportunities out of which 15-20% in advanced stage of negotiation. Now let's move to value creation. In this month we are addressing the new phase of our strategic plan with a clear focus on growth. Our investment plan is well on track. We've continued to increase shareholder remuneration with €6.6 billion returned through dividend and share buybacks. At the same time, we maintained a comfortable net debt-to-BDA ratio at 2.6 times. Due to this, the 6% EPS growth for 2026 is already secured, without considering any contribution of further shares by back or acquisition. I now hand over to Stefano, who will give you more details on our first half results.

Thank you Flavio and good evening to all of you. I will start giving some highlights about our business results. As in the last release, we have segregated the trading and wholesale segment results, because this activity that maintains its proper relevance is now in a completely different shape when compared to the past. As you know, our focus has shifted to an energy management model where commodities contracts, trading positions and related derivatives are no longer the end game, but they are instrumental to our core business that is to build and manage power capacity, generate, distribute and sell energy and adjacent services to our final customers. 2026 is the year where this discontinuity is pivotal in the results, given the expiration of the last 2022-2023 huge position matching commodities, contracts and derivatives with our generation. This means that now we have 100% of the production potentially devoted to our final customers and the generation supply is now 100% an end-to-end integrated value chain. To be consistent when moving to the financial results and help our stakeholders to share this evolution, we will release some additional financial data about the composition of the Global Generation and Trading Unit, where the trading and wholesale results is accounted. This will not represent an adjustment of previous year results and in order to favor the best potential acknowledgement we have also eliminated any adjustment for example as we did in the first quarter so the numbers are clear. and are the same of last year, we will just segregate these trading and wholesale figures from the unit that is called Global Generation and Trading. And we will publish all the details you may need in order to better understand the presentation and the business results that we are now commenting into this new landscape. Before moving ahead in the presentation, I want to underline that in the first half the ABTDA conversion into net income reached 33% and net income share on full-year target achieved 55% of the full-year results. In terms of target, when we refer to target in this part of the presentation, we refer to the target without any potential movement from the basic figure. To give more color, more strategic overview at the business dynamics and having clarified the net of trading perimeter, I think it's better to move on page 8. Here we can appreciate how the first half delivery improved the quality and the visibility of our organic growth. First block is the distribution business that confirmed a double-digit EBITDA expansion reaching €4.8 billion and a 10% growth year-on-year, approximately €400 million. This consistent trend, boosted by a continuous expansion of CABEX and RAB, further enhanced the share of our group's margin that stood in the six months at 41%, another step up of 3 percentage points compared to last year. Second block. The generation supply business shows a very similar trend when excluding the trading world stage segment. A reshaped international portfolio is the driver of the 600 million EBITDA growth. A very positive performance if we consider the persistent headwinds like the ancillary services in Spain or their containment especially in South America. Finally, I would like to highlight the marginal exposure related to the trading and wholesale segment that accounts for just 3% of the Group's EBITDA, minus 6% when compared to last year. Let's now move into the business highlights. I start this section with the integrated margin evolution and with the geographical description of the results that I think is better considering also what we were referring about headwinds attainment in order to comment the group results. Starting from the top of the slide, we have La Damme, where the growth has been supported by the additional built capacity and by the improved hydro generation in Colombia. As I said before, we are to highlight that the persistent containment in Brazil offset and improved price scenario also in the northeast of the country where you know we have a significant portion of our capacity so it's a pretty good news. Unfortunately, the entertainment is not allowing us to take benefits in this moment of this trend in the market. In Chile, the poor hydro production in the second quarter was compensated in the first three months by the long-term gas contract optionality. In Iberia, the new integrated value chain that was introduced recently that coupling the retail volumes with renewables and nuclear production resulted into a reshaped and more profitable sourcing model based on a best-to-best flexible matching of the generation and supply profiles. And in the commercial side, We started in March with this action, exiting some well-identified and costly, also ineffective, push sales channels whose acquisition quality is not aligned with our ambition. On top of that, we have a supportive regulation of the island generation that pave the way also to future higher investment with a fair RAB remuneration. We are talking about real RAB, it's not a RAB like somebody say in the past. Finally, in Italy, the poor hydro resources availability offset the recent spot price upside. On the other hand, the retail business stabilizes its trend thanks to the increasing adoption of fixed price offering representing a mutually convenient hedging from the spot price spike. But I will comment this trend also in the following slide. I'm on page 10 of the presentation. As said before, the New Energy Model paradigm protects both sides of the value chain from exogenous and unpredictable events that turn into price volatility. In this context, fixed offerings shield both customers and suppliers, allowing for a secure sourcing cost and for a mutually fair, affordable, sustainable and secure price for the final customer. Looking at the trend of the average fixed price in the last four years, you may see that after the spike observed in 2022 and 2023, customers were repositioned, enjoying A 14% average reduction, that means a 40% reduction if we start from 2022 and we land on 2026. And the relevant portion of this reduction was sustained through the sourcing efficiencies with the matching that I'm trying to Thanks to our generation we can now maintain the price of the customers unchanged. Independently from the present, for example, short-term spike that is happening in Italy in these last three months. Why we can maintain this price? Because the sourcing is made through our generation. So for me it's important to stabilize the pricing and having a fair and mutual Benefit in terms of pricing, but especially in terms of ability to offset any potential change in the market condition. Our competitor, for example, if you look at the pricing of the recent offer, also from the more aggressive, they were around 150 euro just for the energy component. This is exactly the price that they have to pay in order to source the energy that they will sell to the fixed customers they want to acquire. I say this because what is the positive and visible return for the company? Not a spike in the margin, but A spike in the average lifetime of the contracts of the customers that increased two years from three to five years and this was the result of a dramatic reduction in the churn that moved from more than 30% in 2024 to Below 20% in the 2026 and these months. It's also continuing to improve but again this is a specific situation that we have today when we have an additional benefit when compared to the other players in the market. Let's now move to the grids. The EBITDA here reached 4.8 billion, as I said before, increasing 10% versus the same period of last year and accounting for 41% on the total of the group. If we look at the evolution for the geographies, in Italy, It's a clear example of what we consider consistent and resilient. We continue to increase the CAPEX. Now we have a single digit change, but what is really important in Italy is that we are improving strongly the RAB expansion because, as you may remember, I commented before, when you Make a mix where you eliminate, for example, the grants that clearly are positive because you have the reimbursement. You have a margin, let's say a single digit margin up to 10%. Margi, but zero of that amount move into the rub. When I move from grains into normal, let me say, capex, this make a completely different change in terms of rub, also because I already close the gap between the rub in, rub out. and talking about this is exactly what we expect to happen in Spain where we have let me say a vegetative rub in the last years you may see 11.4 11.5 11.3 now a new cycle has already started so in this quarter we do not see the benefit let me say that we expect moving forward and in this quarter We are starting this new cycle of investment but you have also to consider that what sometimes we consider one-off is not just a one-off because if you look inside the one-off you see that this one-off is related to a positive change into the regulation so you have the recovery of some In LaDame, when we see Colombia, We, let me say, are very happy to see how this country can be resilient also in terms of the grids. Brazil has been very positive because of the Tariff adjustment related to inflation. We increased the investment by 30% when compared to last year and this also has a positive benefit to the RAB. Now, what is important in Brazil is that these are, let me say, book value that are right for us. This composed the famous financial asset at the end of the concession, so it's real value, but we have to transform this value into cash in the next quarters. The REB. As you may see, we have reached approximately 50 billion. That, as we know, increases strongly the resilience and visibility of the EBITDA moving forward. And we are talking about, as you see, more than 40% of our present EBITDA. Moving into the next slide, we see that the CAPEX, that are one of the boosters of the REB of the EBITDA growth, have reached 3.5 billion. 0.6 billion in Brazil, 30% growth, 2.2 billion In Italy, the story of the investment for the resilience, the quality and the development of the network is now a four-year story. and as you may see in the right side part of the slide you see how we reach with a consistent growth in the capex the 4.5 billion that we expect for these years and what is important that in the six months with 2.2 billion of capex into the italian network we have already realized what was the average investment in the five years from 2018 to 2022. Now I'll quickly show you the EPS evolution before diving into the cash flow dynamics. The Earning Per Share Growth is supported by a sound industrial operational business with the This remarkable results in the first half represent 54% of the target for the full year and allow us to expect an earning per share for 2026 landing at 74%. Corresponding to the high end of the guidance range. Look at that evolution for 2026. It's important to underline that this result will be based From now to the end of the year, purely on organic growth, driven by the consistent delivery of our investment plan and the strategy set to enhance the value of our existing asset base. To summarize in numbers, the 2026 full-year net income expectation will also Exceed the 5% growth year-on-year set at the Capital Market Day, positioning us in the high end of the range. with the already executed share buyback for enhancing the EPS accretion by 200 basis points. This is something that you can also see today. This is a translation of the difference of the growth between net income and EPS that will be replaced in this year, 200 basis points at June, 200 basis points at December, because we are now considering a scenario where the share buyback at NSPA is what we have already realized. We are not imagining to change any of the 1.5 billion remaining but in this moment we are planning the remaining part of the year with the existing and executed the 2.0 billion of the share buyback. This means that Brownfield Contribution, and this additional share by BECC, not only at SPA, because also in these I have residual, as you can see in the annex. Programme of Share Buy Back that is part, as we stated clearly, of the Capital Market Day plan of both Endesa and Enel, that can further expand the growth potential ahead of 2026. And now, as promised before, I will move into the cash flow and net debt dynamics. The cash generation continues to be strong, with the recurring free cash flow standing at €6.1 billion, implying a cash conversion higher than 50% that is solid if we consider the seasonal dynamics on CAPEX that we The recurring cash flow generated by the business net of taxes and financial costs cover the capex of the period for 1.1 billion exceeding that are serving part of the shareholder remuneration that is compiled by 1.5 billion executed share buyback and 2.9 billion dividends. What is important in this result is that we have a significant FX impact of 1.2 billion. This is important to remind that we are not adjusting this value as it happens sometimes in other parts of Europe. We have to consider this as, technically speaking, it's called health to maturity. This 1.2 billion, that also includes the leasing, will not exist. So it means that there are temporary impacts of, especially coverage, in terms of FX and variable fixed interest rate, that As is in our history also, when we repay our debt at the maturity, this will completely disappear. So our debt, our net debt is 60 billion, this is part of the accounting routes of the IFRS, so we have informed the market that including this component, our debt is 61 billion. In this cash flow we have the first impact, let's say, the financial one of the energy degree and we have prepared in the last page of the presentation, 15, an update because we know that this is considered a really important item. So we have put into this slide the slide of the capital market day, that we spent all the night preparing for the market and the update regarding the part of the grid that is already clear and active. If we start from the ETS offset, as underlined in the energy degrees, this measure is provided for 2027, so the impact on 2036 will have been zero in any case. As you probably know, currently there are analyses ongoing at EU and national level to define the measure that will not The final goal is to smooth the energy price in Italy also for the ETS component. What is important to keep in mind is that in our plan assumption We have already embedded a severe potential impact of the energy degree. If you remember, it was 3 cents in the EPS only related to these items. It was the first block of the bridge. The measure related to the early payment of system charges was expected, as you may see in the comparison between the Capital Market Day presentation and the actuals, at 800 million. The effective unbalance, as you may see, is higher at 1.2 billion. This is not because we made a mistake in the cash flow, but because in the transformation, the degree to low, there was added the component of the ASOS, the so-called ASOS, that is the system charges collected to support renewables. Finally, the IRAP has projected and expected impact for 0.1 billion approximately, both on debt and on the reported net income. For next year, regarding these items that are referred more to the financial side of the measures, we expect to have a total impact on the debt ranging from 1.6 to 1.8 billion, because the system charges do not depend just by the number of customers and so on, they depend also by the movement that we have in the component of the price that is not defined by us but by the regulatory watchdog. So this will be composed by the 800 million that we already projected, the 400 million that are two years, 2026 and 2027, of the additional two percentage points on the ERAP, the regional taxes, and the grid block is what we may expect, that at the moment is 400 million, We have made, let me say, a range coming from a potential change of the other system charges that are now in June representing the 1.2 billion impact that I have already commented. What is important is to clarify two points. These impacts are on the stock of the debt and are, let me say, a one-off because they are not a recurring cash flow impact. This means that our free cash flow in 2027 will not be affected by 1.2 impact of the system charges advance payment because this happened just one time in the first year of adoption. Next year, we will have an higher debt of 1.2 billion, but the cash flow will be not affected by this movement because we will anticipate the payment in 2026 or 2027. So in 2027, we will have the benefit of not having to pay two times the charges coming to the final photography of the impact. Second, this impact of 1.6 do not include any about the 2027 measures that are the recurring one because they, in the intention of the measure, will impact the Thank you very much. Any doubt in your comprehension of the energy degree at this moment? So I can now hand over to the CEO for some closing remarks.